Internal Revenue Code (IRC) Guam and the Virgin Islands tax systems mirror the IRC, that is, all provisions of the IRC are applied to them. Each time a change in the tax code occurs, it has a potential financlal impact on these territories, For example, the Virgin Islands reported a potential loss of about $13 million in fiscal year 1982 and an estimated $25 million in fiscal year 1983 due to changes in federal tax rates and regulations. Guam business officials reported in 1982 that the mirror tax system has "sad- dled Guam with an overly complex, inadequate revenue generating capacity which imposes non-competitive tax rates which hinder efforts to attract foreign and U.S. corporations to Guam." They believe the IRC places Guam at competitive disadvantage with Pacific-Asian neighbors with lower tax rates, and that Guam should be allowed to adopt its own income tax system. Similar concerns were voiced by NMI officials, who believe the IRC is inappropriate for their local situation. The NMI has successfully deferred implementation of IRC provisions until January 1, 1985. At the time of our review, the Department of Treasury was studying tax treatment of these territories to develop a mutually satisfactory tax system. Other problems A government of Guam Planning Office analysis in tified 38 different labor and wages, tax, federal laws communication, Guam's economic development. and regulations, and others, 1982 iden- including as constraining Guam and NMI also cited the Clean Air Act as an example of a federal law which was based on state- side conditions which are not appropriate for a small island with prevailing tradewinds. Guam faced costly decisions to either burn expensive low sulfur fuel or to install $20-million scrubbers on its power plants. After years of arguing its case, Guam received a temporary exemption from the Clean Air Act under provisions of the 1983 Territory Omnibus Act (Public Law 98-213). . FEDERAL EFFORTS TO ADDRESS LAW PROBLEMS In the early 1950s, Congress authorized separate laws commissions fcr Guam and the Virgin Islands to identify federal laws hampering their development. Both commissions were shortlived, but’ some law changes resulted from their recommendations. Since 1980, efforts to remedy problems with federal laws include in 1980; 32 9006239 ; YE an ot he aR. --creation of the Northern Mariana Islands Laws Commission